The Reasons That Bitcoin Uses So Much Energy

Cryptocurrency has exploded in popularity in recent years. It has been propelled into the mainstream as many people invest in it or use it on a day to day basis. Far and away the most popular cryptocurrency is Bitcoin. Bitcoin was the first cryptocurrency ever created and is the largest by a mile. In fact, Bitcoin has a total market cap that is over 7 times larger than the next largest cryptocurrency.

However, one thing about Bitcoin that is becoming almost as famous as the currency itself is just how much energy it uses. Mining and minting new Bitcoin, and verifying transactions, uses an unbelievable amount of energy. According to estimates from the University of Cambridge, Bitcoin uses more energy than the entire nation of Switzerland.

Even if you use a fantastic service like EnergyBot to find the best energy rates in your area, the energy costs of mining Bitcoin can still be astronomical. But why does Bitcoin use so much energy? If that is something you’ve been curious about, then you’re in luck. This article is going to go over a couple of reasons why Bitcoin uses so much energy.

The Mining Process is Very Energy-Intensive

The first reason that Bitcoin uses a lot of energy is because the mining process requires it. New Bitcoin are created by a process called mining, which also maintains the transaction ledger. Verifying transactions (or blocks) in the blockchain ledger is incredibly tedious, as it involves miners finding a cryptographic key.

This is a difficult computing problem, which takes a lot of computational resources to handle and solve quickly. So essentially, when a computer is mining Bitcoin, it is using a ton of power to solve a complex math equation and if your computer is the first to solve it, you are rewarded with Bitcoin. As a result, because many people want that reward, there are thousands of computers trying to solve the very difficult computing problem. This uses a ton of energy, as you could imagine.

Thankfully, the mining process will eventually be less energy-intensive. A big reason for this is that the reward for creating a block/verifying transactions is going down over time. When Bitcoin was created and launched back in 2009, every block had a 50 Bitcoin reward for the individual that created it.

Today, that reward would have a value of over $500,000 USD. However, the reward for mining Bitcoin is being halved every four years. So in 2020, the reward stands at 6.25 Bitcoin. This is still a huge reward, but when you account for the computing and energy costs, it has become less and less profitable, which should lead to some ceasing their mining operation, thus lowering the amount of energy being used.

The Rising Price of Bitcoin Has Led to More Competition

Another big reason why Bitcoin uses so much energy is the massively increased price over the last few years. While Bitcoin has had some small rises in the past, nothing compares to what happened in late 2017 and early 2018. At the beginning of 2017, the price of a Bitcoin was barely over $1,000. Only 1 year later, the price was around 15 times that amount.

As you could imagine, this huge increase in price meant that the mining rewards for creating blocks were incredibly inflated as well. As a result, thousands of individuals and companies wanted to get in on the action. Not only that, but every individual or company has been upgrading their computer hardware to be better equipped to solve the problem, and devoting more energy than ever to their mission.

If the price of Bitcoin were to ever decline, we would begin to see much less energy being used. However, with its price still quite high and no other cryptocurrency challenging it’s top spot, don’t be shocked to see it’s price remain high for the foreseeable future.

In conclusion, we hope that this article has been able to help you learn some of the many reasons that Bitcoin uses so much energy. Over time, as the reward for mining Bitcoin drops, we will likely see a drop in energy usage as well. But as long as mining Bitcoin is profitable for miners, expect to see it continue to be an energy hog.


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